The Latest Housing Market Tendencies Amid an Unparalleled Pandemic
The Latest Housing Market Tendencies Amid an Unparalleled Pandemic
The economic upheaval from the Coronavirus crisis has disrupted the housing market, not demolished it. Everyone in the real estate food chain has adapted accordingly to best serve their customers and clients, especially Benton Capital.
Nonetheless, trends are fickle due to COVID-19’s shock to businesses and consumers this past spring. In fact, many in the real estate field believe nothing will change for quite some time. And the pros who analyze activity on an annual basis are now rushing into monthly trends as they stay alert to the market’s short-term movement.
How does the market look this very minute compared to what may be coming? It’s summertime, which means fall is around the corner. Although nobody knows for sure, Benton Capital has compiled these 10 nationwide facts on mid-summer 2020 real estate to help you strategize the rest of your season locally:
- The United States hasn’t seen an average mortgage interest rate this low — ever — as 30-year mortgages reached a record low 3.03 percent in July 2020. The monthly survey keeping track of such data goes back to 1971. Both Fannie Mae and Freddie Mac think it could fall even lower between now and 2021, perhaps into the 2.75 – 3 percent range. However, it remains to be seen whether homebuyer demand will continue if COVID cases rise to the point that it hinders economic growth even more so, which would potentially weaken household formation. View “Mortgage Rates in U.S. Hit Another Historic Low in Early July”(World Property Journal).
- Refinance mortgages have been all the rage since the beginning of 2020, but purchase mortgages are finally seeing a slow, steady revival this year. As mortgage rates decreased for a sixth consecutive month, purchase mortgages represented 42 percent of all “closed” loans as of June 2020, higher than the previous month. Also, FICO scores (credit scores) continue increasing on a month-to-month basis. See “June Ellie Mae Origination Insight Report Data Shows Purchase Market Rebounding As Interest Rates Continue To Decline” (PR Newswire) and the “June 2020 Origination Insight Report”(Ellie Mae).
- Just recently, the proportion of mortgages closing and funding have been falling, but credit scores are increasing. The average FICO score (credit score) on both purchase and refinance mortgages of all types that “closed” has risen 9 points from March to June — from 742 to 751. However, the number of purchase and refinance mortgages that closed and funded in June was 73 percent, down from 77 percent in March. Meanwhile, it took an average of 47 days to close all loans, both purchases and refis, in June. Check out “Average FICO Scores Rise 9 Points Since March” (Mortgage News Daily).
- Mortgage delinquencies are ticking up, even as forbearances are decreasing. The delinquencies are considered “early stage,” so it’s anyone’s guess as to whether they remain in delinquency or reverse back to normal payment status. This share of mortgage delinquencies in April (30 – 59 days past due) hit 4.2 percent, reaching its highest level in 21 years. Meanwhile, total mortgage loans in forbearance fell for the fourth consecutive week to 8.2 percent in early July, meaning 4.2 million homeowners were in forbearance — better in the short run, but worse than the 0.25 percent reported just prior to the COVID-19 pandemic. Read "Share of Mortgage Loans in Forbearance Falls for the Fourth Week in a Row"and "Early-Stage Mortgage Delinquencies Rate Hit Highest Level in 21 Years in April"(Housing Wire).
- Home foreclosures fell to a record low during the first half of 2020, as this area was bolstered by a healthy real estate market before COVID-19 hit. More than 165,000 properties with default notices, scheduled auctions, or bank repossessions were filed — down 44 percent from the same period a year ago. Distressed property volume is almost guaranteed to increase significantly once the federal foreclosure moratorium is lifted as millions of Americans have already missed their mortgage payments in June amid higher unemployment. Check out “Top 10 U.S. Metros with the Highest Foreclosure Rates in Q2 2020”(ATTOM Data Solutions).
- Housing inventory is drastically low compared to this time last year — and simultaneously, the number of monthly home sales is rising in the short run. During the first week of July, home sales rose by 2 percent when compared to pre-pandemic home sales (the short term), marking the first time sales surpassed pre-pandemic era levels. However, total home-sale inventory (the percentage of for-sale listings versus total housing stock) is down 32 percent from a year ago, which is no doubt impacted by the fact that new sales listings, a different metric, were down 19 percent. View "Home Sales Surpass Pre-Pandemic Numbers"and "Housing Inventory Down 32 Percent Annually"(MReport).
- What hasn’t changed since COVID-19 hit? A strong pattern of up-and-coming consumers funneling into the homebuying stage of their lives. Millennials are still aging into key lifestyle decisions that signal an increase in potential homeownership demand. The difference is, many Millennials are running behind in those big decisions compared to Generation X by about 3 – 5 years approximately. Check out "Pandemic Unlikely to Slow Looming Wave of Millennial Marriages and Corresponding Increase in Potential Homeownership Demand in the Long Run" (First American's Economic Insight blog).
- Expensive houses are slanting the overall data on home values since their median value is falling quicker than less-pricey houses. That’s why the median sales price of a home fell 5.5 percent in the second quarter of 2020 to $263,400, compared with the prior quarter. June marked the second consecutive monthly decline where the annual growth rate slowed from the month prior (two month-to-month declines). Monthly and annualized price data is noisy right now due to economic disruption. Read "Sales-Price Growth Lags for Second-Consecutive Month" (MReport).
- Now is the time for many homeowners to finally start those hairy repair and/or remodeling projects. Some remodeling contractors and work crews are busier today than before the COVID-19 pandemic, building decks, patios, porches, and redoing kitchens and bathrooms. Small and moderately sized remodel projects are hot right now, with larger projects less so. Nonetheless, rising material prices, especially lumber, and skilled laborer shortages are proving a challenge for both contractors and homeowners. See "Remodeling Industry Sees Optimism Despite COVID-19"(National Association of Home Builders blog).
- There’s rising popularity for accessory dwelling units (ADUs) in expensive cities and neighborhoods. The movement toward building granny flats, garage apartments, and in-law suites is increasing, which amounts to extra housing space on the same property/lot. The scarcity of affordable housing in high-cost areas has resulted in many cities adopting ADU-friendly legislation. The number of for-sale listings that mention ADUs has risen as well. Demand for ADUs is highest in the fastest population-growing regions of the country. See “Granny Flats, Garage Apartments, In-Law Suites: Identifying Accessory Dwelling Units” (Freddie Mac blog).